© IL&FS Ltd. 1 AEROSAPCE INFRASTRUCTURE -An Opportunity Mapping Infrastructure Financial Services Limited Milind Patel- Executive Director IL&FS Financial Services Limited FICCI- INDO US SUMMIT 30 Nov 2006

© IL&FS Ltd. 2 Project Development Project Sponsorship Project Management Stakeholder Value Management Investment Banking Structured/Asset Finance Corporate Advisory/M&A Project Finance Private Equity Venture Funds Infrastructure Funds Distribution Broking Project Syndication Merchant Banking Successful Delivery of An Infrastructure Mandate on a PPP basis Engineering & Project Management Legal & Contractual Documentation Environmental & Social Management Project Design & Sector Specialization Management & Technical Skills Financial Engineering Skills IL&FS-an introduction Incorporated in 1987 with mandates to commercialise infrastructure and develop financial services business Over the years has developed both lines of business and each business is developed as separate profit centres

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4 INDIAN ECONOMY- The Takeoff Stage

© IL&FS Ltd. 5 Overview Indian economy – The 4th largest & 2nd fastest growing economy in the world India GDP for FY 2006 was appx USD 570 bn at constant prices 4th largest economy in the world in terms of purchasing power parity A middle class customer base of over 300 million people More than 7% GDP growth for four consecutive years Infrastructure a key bottleneck Indian Economy –A Snapshot

© IL&FS Ltd. 6 …INITIATIVES IN THE RIGHT DIRECTION Strong political will and Improved policy environment: Electricity Act, Draft Maritime Policy, Draft Civil Aviation policy, etc Ring fencing of funds earmarked for infrastructure Nomination of implementation authorities Urgency to bring about commercial viability is apparent Momentum of private participation picking up, with innovative financing concepts like ‘Public Private Partnerships’ and ‘Viability Gap Funding’ Infrastructure Challenge INFRASTRUCTURE CAN BE A GROWTH CONSTRAINT India Economic Growth triggered by economic reforms in 1991which led to a huge growth in services, manufacturing and global trade The infrastructure development has not kept pace with the growth in manufacturing and services sector leading to a bottleneck Huge Investment Requirement for physical infrastructure for power, roads, ports, airports and railways

© IL&FS Ltd. 7 INDIAN AVIATION –Witnessing High Growth

© IL&FS Ltd. 8 Indian Aviation Industry- Liberalisation 1953: Nationalization of Aircraft Industry Consequently, assets of 9 existing companies transferred to two entities in the aviation sector controlled by the Government in a) Indian Airlines, primarily serving domestic sectors b) Air India, primarily serving the international sectors Implication Aviation became a preferred mode of transport for elite class Restricted Growth of Aviation Industry High Cost structure Underdevelopment of infrastructure 1986: Private Sector Players permitted as Air taxi operators Players including Jet, Air Sahara, NEPC, East West, Modiluft,etc started service 1994: Private Carriers permitted to operate scheduled services Six operators granted license however only Jet and Air Sahara able to service 2003: Entry of low cost carriers Air Deccan, Spice Jet, Go Air, Indigo Implication Aviation has become affordable with check fares and discount schemes Various Operators with different business model Huge growth foreseen in the Aviation Industry

© IL&FS Ltd. 9 Industry Characteristics HUGE POTENTIAL Under penetrated Market - Total Passenger Traffic only 50 mn as on 31 st Dec 2005 amounting to only 0.05 trips per annum as compared to developed Nations like United States have 2.02 trips per annum - High Level of potential demand with growth in Indian economy Untapped Air Cargo Market - Air Cargo has not yet been fully taped in the Indian markets and is expected that in the coming years large no of players would have dedicated fleets What this means… - Build up of capacity by existing players and entry of new players CONSTRAINTS Infrastructure Constraints -Shortage of airport facilities, parking bays,air traffic control facilities and takeoff and landing slots - Continued growth might be hampered Relatively Limited Reach -Only 454 airports with less than 100 airports having more than one daily service

© IL&FS Ltd. 10 High Growth in Passenger and Air Cargo Traffic Source: Ministry of Civil Aviation Passenger Traffic Trends Air Cargo Trends 2010 (Projection): million (69 mn domestic & 40 mn international) 2010 (Projection): 3,360 thousand tonnes

© IL&FS Ltd. 11 Huge Growth- Huge Plans Fleet Acquisition New Fleet Orders -More than 500 Fund Requirement- USD bn approx Order Book – New Players Indigo 100 Air India 68 Air Deccan 60 Kingfisher 50 Indian Airlines 43 Jet airways 40 Go Air 36 Spice Jet 20 Expected to grow to 125 from 7 by 2025 Competitive Pressure Full Service Price Low cost Carriers changing the game Indigo COMPETITIVE LANDSCAPE Capacity Expansion and New Players Air Cargo Market

© IL&FS Ltd. 12 AIRPORT INFRASTRCUTURE-Huge Opportunity

© IL&FS Ltd. 13 Ministry of Civil Aviation Responsible for the formulation of policy, development and regulation of Civil Aviation. Its functions also extend to overseeing airport facilities, air traffic services and carriage of passengers and goods by air Airport Infrastructure- Regulatory Authorities Other Attached/Autonomous Organisations: Directorate General of Civil Aviation :Promote safe and efficient Air Transportation (DGCA)through regulation and proactive safety oversight system Bureau of Civil Aviation Security :Regulatory authority for civil aviation security in (BCAS)India Airport Authority of India (AAI) :Accelerate the integrated development, expansion and modernization of the operational, terminal and cargo facilities at the airports

© IL&FS Ltd. 14 India Airport Infrastructure – Huge Growth Potential AAI manages 127 airports which includes: 13 International airports (excluding Delhi & Mumbai and including 3 civil enclaves) 7 Custom airports 28 Civil Enclaves 80 Domestic airports 2 Joint Venture Airports (Delhi & Mumbai) AAI manages Civil Airports There are 454 airports / airstrips in the Country. This includes Operational, Non Operational, Abandoned and Disused Airports Majority of Civil Airports managed by Airports Authority of India AAI responsible for airport infrastructure development Current Status The increased passenger and cargo traffic has posed new challenges in the area of providing adequate infrastructure at airports Imperatives Expansion of capacity at existing airports Up gradation / modernization of Metro and Non-metro airports Development of new Greenfield Airports Induction of modern technology for efficient handling of Aircraft, Passenger and Cargo at airports Up gradation of CNS/ATM facilities

© IL&FS Ltd. 15 STEPS HAVE BEEN TAKEN TO DEVELOP AIRPORT INFRASTRCTURE Private investment encouraged –both in Airlines as well as Airports Airport Infrastructure Policy,1997 permits private equity participation for development of airports to bridge resource gap and to bring efficiency Foreign Direct Investment has been allowed upto 100% in airports, beyond 74% requiring Government approval Foreign equity upto 40% and NRI/OCB investment upto100% is permissible in the domestic air transport services with prior GOI approval Domestic Carriers permitted to operate international flights Open Sky policy for cargo flights Attractive fiscal incentives/concessions, moderate tax rates & Tax holidays Public-Private Partnership encouraged Liberal Equipment Import regime Comprehensive Civil Aviation Policy to be finalized very shortly Airport Privatization -Delhi GMR-Fraport consortium -Mumbai GVK- South African Airports Recent Regulatory Initiatives

© IL&FS Ltd. 16 AAI- Plans for Airport Infrastructure Airport Authority –Expenditure Plans Source: Ministry of Civil Aviation IMPACT Opens a huge market for companies operating in Aerospace and Allied Industries Opportunity big for sophisticated and high end technology products like communication and security equipments A large pie for foreign players as Indian players not equipped to cater to demand

© IL&FS Ltd. 17 Opportunity Universe Airport Operations Cargo Facilities and Warehouses Supply of components (to HAL, others) Raw material - sheet metal, forgings, surface engineering Aerospace Software - Systems MRO facilities & equipment Simulation, training & consultancy Outsourcing/offshoring design & development (offsetting) Electronics/Avionics Support services (sky-chefs) Specialized Consulting (Traffic Study, Business Advisory) Navigational aids, Instrument landing systems (ILS) Communications equipment Weather equipment Baggage handling and information systems Aerobridges Centrifuge, Simulators Smart Cards systems, Baggage Screening systems, Multi-zone Door Frame Metal Detectors Airfield lighting systems Radar systems, Flight information systems Products Market Opportunity

© IL&FS Ltd. 18 USD Millions Market Size Estimated that more than 50% of the above market will be catered by foreign players Source: UK Trade and Investment

© IL&FS Ltd. 19 Sell existing products and services into growing Indian market directly/indirectly (through OEM’s) Level 1 Level 2 Level 3 Level 4 Formulate strategic alliances, CRM bases, support bases to sell into Indian market Use maturing, low cost Indian platform for Sourcing from India to sell into World Market Setup JV’s in India to take advantage of the edge given to domestic firms, sell into Indian and Global Market Entry Strategies for Foreign Companies

© IL&FS Ltd. 20 Sell into Indian market through distributors Huge demand for pilots and cabin crew. Set up facility in India Electronics Components Airport Services & Development Maintenance/Re pair/Overhaul Interior Funrshings Ground Support Equipments Training and Educational Institutions Be part of several consortiums to develop and manage Indian airports or form partnerships with existing consortiums in India Establish own MRO facilities or sell to the facilities that are going to be established Sell Ground Support Equipments by forming partnerships with Indian marketing arms to meet the Indian demand No professional aircraft finisher in India. Immediate opportunity in India Product Segments: Possible Strategies

© IL&FS Ltd. 21 Summation Indian Aviation has seen high growth on account of sustained Indian socio economic growth and liberalized Government initiatives Airport Infrastructure needs to improve significantly to meet the current and future demand of the Indian Aviation Sector Authorities have initiated various steps to implement modernization, reconstruction and development of airport infrastructure to implement infrastructure development plan Provides a huge opportunity for private players operating in Aerospace and allied industries Significant opportunity for foreign companies as Indian companies not technologically equipped to cater to requirements

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© IL&FS Ltd Financial Year Million Passengers HUGE POTENTIAL MARKET Huge potential market Discount Fares/Low Cost Carriers fares competitive to premium railway fares Ever increasing reach Indian Railways-Premium Passengers Growth Drivers DEMAND DRIVERS GDP Growth has been more than 7% in the last 4 years The rising middle class of more than 300 mn is fuelling the growth The Increase in Consumerism and Affordability of Air travel Government Liberal Policy to allow private carriers and entry of Low Cost Carriers has lead to a increase in demand in passenger traffic Domestic Tourism and International Business Travel and Tourism has also greatly fuelled the rise of Indian aviation sector

© IL&FS Ltd. 24 International Air Traffic growing at Growing Indian economy and globalized trade Rise in international tourism International Air Passengers PAX( in Mn) FY02FY03FY04FY05 Financial Year Tourism Domestic Tourism growth 15% Boost with rising per capita income and increased consumerism Foreign Tourist Arrivals 20% for 2004 and Year Mn Passengers Growth Drivers